In a decision issued on August 27, 2013 (4053532 Canada Inc. c.
Longueuil (Ville de), 2013 QCCA 1428), the Québec Court of
Appeal analyzed the nature of the rights of the parties to a
deed of emphyteusis and examined the issue of the transfer duties
payable in connection with the sale of the rights held by the owner
(the emphyteutic lessor). In this case, after the sale by
the owner (the emphyteutic lessor) of its rights in
several immovables which are subject to contracts of
emphyteusis, for a price of $4.2 million, the municipality (the
respondent) had issued accounts for a total of $484,395.44 in
transfer duties, based on the total value entered on the roll for
the immovables sold. The purchaser contested the accounts and,
after the Superior Court dismissed its claim seeking to have the
accounts cancelled, the purchaser appealed.
Was the sale of the emphyteutic lessor's rights a
"transfer of the right of ownership on a property" giving
rise to the payment of transfer duties?
The Court of Appeal answers in the affirmative, stating that
emphyteusis is a dismemberment of the right of ownership, not a
transfer of such right. Similarly, the "reconstitution"
that occurs at the end of emphyteusis is not a transfer of the
right of ownership. Even though, during emphyteusis, the
emphyteutic lessee has all the rights attaching to the status of
owner, it does not actually have that status. The person whose
property is affected by the emphyteusis remains its full owner and
becomes the owner, by accession, of all the improvements made to
The Court also dismisses the theory that an emphyteutic lessee
has, as superficiary, a full right of ownership over the structures
it erects on the owner's land. It emphasizes the fact that
the right of superficies is a mode of the right of ownership, while
emphyteusis is but a dismemberment of such right. Thus, emphyteusis
does not give the emphyteutic lessee greater rights over
improvements than it has over the land.
The Court concludes that the appellant had become the owner of
each immovable in its entirety (land and buildings), even if the
exercise of its right of ownership was limited by the
What basis should be used to calculate the transfer
The Court agrees that some interpretation is required, stating
that using the value entered on the roll for the immovables, as the
municipality had done, leads to a highly inequitable result.
It states that, in the context of emphyteusis, the market value
of an immovable must be determined in the hands of the owner
because it would be unfair to impose another market value which, in
this case, would be the value of the immovable in the hands of the
emphyteutic lessee. These two values cannot be the same, and this
duality is justified by the specific ownership regime created by
emphyteusis. During emphyteusis, the market value of the immovable
in the hands of the owner must necessarily reflect the
dismemberment of the right of ownership, which, not surprisingly,
reduces that value. In the hands of the owner, the immovable does
not constitute a unit of assessment entered on the property
assessment roll; consequently, section 1.1 of the Act respecting
duties on transfers of immovables (which uses the value entered on
the roll as the basis for computing the market value) does not
apply. However, in the hands of the emphyteutic lessee, the market
value of the immovable will be the value entered on the roll.
The Court recalculated the transfer duties based on the $4.2
million selling price, which it identified as being not only the
consideration stipulated, but also the consideration paid and the
market value of the property sold (that is, the value of the
immovables in the hands of the owner). Consequently, the transfer
duties were reduced to $61,500.
The Court states that the extent of the
interpretation effort involved in reaching its
conclusion was an indication that it is time the legislature
consider the matter - as well as all aspects of the
dismemberment of ownership - and, if necessary, reform the
rules governing duties on transfers of immovables applicable in
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